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March 10, 2008

What is going on between Wahaha and Danone?

I reported a few days ago on my French blog "En direct d'Asie" (For viewers from China click here) that Danone and Wahaha might have found the way to settle their differences: "Solution en vue pour le conflit entre Danone et Wahaha? "

To summarize my French post for the non-English speakers, I explained the benefits for both parties to settle an agreement by listing the joint-venture Wahaha-Danone on the Shanghai Stock Exchange:

1/ Danone can get back the "illegal" branches of Wahaha established by Zong Qinghou without paying too much;
2/ Zong Qinghou and Danone can make a hell of money if the deal go through;
3/ Both parties can save face and bring back the Brand image of the company damaged by the feud;
4/ The listing may help both to leverage money in a fast growing market where competition from local and international companies like Mengniu start to be growing.

I thought this idea was quite clever.

But my hope of a deal was dashed today when I saw that Zong Qinghou rejected the proposal made by Danone. On the sidelines of the current annual session of the National People's Congress to whom Zong Qinghou is a member, he explained: "Danone wants to ensure at least 50 billion yuan (6.9 billion U.S. dollars) in market value if its shares in the new company are lower than 40 percent". [...] But those proposals and conditions are groundless, and we cannot possibly accept them".

Is it only simple rhetoric in order to get more from the deal or Zong Qinghou feel so confident he can win the legal case he has with? 

Definitely, Danone still has a big nail in the shoe.

March 06, 2008

China set-up a look-a-like Nasdaq market

China is moving closer to a full market economy with the establishment in Shenzhen of a Chinese Nasdaq.

"China proposes its own Nasdaq-like growth board in Shenzhen this year to help finance start-up companies, Premier Wen Jiabao reaffirmed yesterday at the National People's Congress session"

This is good news for Chinese start-ups who are looking to financial access. Most of the companies in the Shanghai or Shenzhen Stock Market are State-owned enterprises (around 75%).

You can find Foreign Equity Investors willing to invest on Chinese start-ups; however, the market is still in is infancy when you compare it with European or US financial markets. In addition, in some industries, Foreigners have limited access or it is prohibited to invest in it. For instance, since December 1st, 2007 and the publication of the guide on Investement for Foreign Investors, it is prohibited to invest in real estate.

Chinese companies may therefore be left with good ideas and business plans but will not have the financial strength to pursue their development.

From a personal point of view I am disappointed the Chinese government has chosen Shenzhen to establish a Chinese Nasdaq. I am sure Shanghai will come with some ideas to set up is own one. I favour the set-up of stock exchange in Beijing because Nasdaq companies are mainly working in the IT sector and Beijing with its Zhongguancun High Tech Park is full of IT companies in need of financial support. Also, by establishing a Beijing Nasdaq it may diversify where the money is, not only in Shenzhen and Shenzhen. It would be a bold move but I don't think the Chinese government will listen to me.





February 20, 2008

Xunlei: No more free lunch?

The MPA has decided to take legal action in China against the P2P software company based in Shenzhen Xunlei. For the ones who like to watch the latest US movies, they often turn to Xunlei.  No need now to buy DVD around the corner in the streets of Beijing or Shanghai for 5  Yuan or .50  Euros  you can downlaod them for free through the P2P service.

However, I think the MPA has a tough fight in sight. The problem is not necessarily what will the Chinese court will decide; Chinese judges have greatly improved in the past years or the Chinese laws & regulations do not provide enough assistance in those matters.

The problem is Xunlei shall not be the target; it offers the P2P software but you cannot find the movies on their website; you shall go to gougou.com or 56.com. You don't even have to download them you can watch them livestream.

Tough, tough job to fight against piracy in China! The legal system improves everyday but the technical creativity is even faster.

January 01, 2008

Tagged: 5 things you didn't know about me...

I really don't use this blog to talk about myself but currently there is a tag (here) about it. The new year just started so it would be nice to talk about something different and guess what? it's about me. So let's write!
1- I gained 30 kgs over a period of 3 years. Yes, you read well not 30 pounds or 30 jin, it is 30 kgs. The reason: too much bad stress, frustration but guess what I have decided to do something about it in 2007. Let's see how far I can go!
2- I am 35 and I am not married, not even attached to a single person. No, I am not gay, and no I haven't a bad temper that makes impossible to live with. I just finished a two-year relationship after a five-year one. So I am quite stable but I think I can only fulfill myself when I am single don't know why. Any answer guys?
3- I come from Nice (here) (pronounced Nissss) France: la cote d'Azur! So like many people around me, you ask yourself what the hell I decided to come to China to work. Well, Nice is a little paradise on earth but when you are young and want to discover something new and have thrilling experiences I don't think it is the place!
4- I have lost my mum and dad at an early young age. My father died when I was 23 from a lung cancer; my mother didn't die actually but she cut family ties in 1997. Since then, I have no news of her.
5- I am never satisfied about myself; I always want more. I performed better at school than average, got higher diplomas, speak many languages and successful experience but I don't know why, I see myself as somebody with little value compared to others. Any answer or help on that?

November 19, 2007

China: from red to green

November 12, 2007

INSEAD/ CEO view: Judy Leissner, CEO of Grace Vineyard

For the expats who have been experiencing China for a few years, the prime problem for our nightlife is to find decent wine at affordable price. You can always go to the imported wines from France (my native country), Australia, South Africa, Chili, the US but when you want to buy some local wine, you are stuck with the GreatWall, Dinasty, etc... not bad but not really a good experience for the taste.

INSEAD Singapore, recently invited in a forum Judy Leissner, CEO and President of Grace Vineyard.
A recent article in the Financial Times spoke of Grace’s Chairman’s Reserve as ‘the finest wine so far made in the country that is already the world’s sixth most important grower of grapevines.’

Download MP4 video at INSEAD website

November 11, 2007

A rule of law in China?

I went through a few days ago an article from Forbes Magazine titled "A rule of law in China? written by Merle Goldman is a professor emerita of history at Boston University and an associate of the Fairbank Center for Chinese Studies at Harvard.

China has just concluded its 17th Party Congress, which re-elected its present, Communist Party leader Hu Jintao, to another five-year term, and has put in place the next generation of party leaders. What can be expected from this new generation?

Will they embark on political reforms to match the economic reforms that have transformed China into a market economy and produced 9% to 10% growth for almost 30 years?

In the post-Mao Zedong era, beginning in 1976 with Mao's death and the assumption of power by his Long March comrade Deng Xiaoping, who became China's paramount leader, China has not been completely devoid of political reforms. In reaction to the totalitarian, repressive one-man rule under Mao, who launched disastrous political campaigns culminating with the Cultural Revolution (1966-1976), Deng decreed that no party leader should serve more than two five-year terms.

This political reform helped move China from a totalitarian state, in which virtually every aspect of life was controlled by the party--or more specifically, by one man--to an authoritarian government. The one-party state retains government control of the media and cracks down harshly on political dissent, but its population is allowed to develop more personal and artistic freedom.

Outside observers had great expectations for the current generation of party leaders, led by Hu Jintao, when it came to power in 2002. It is the best educated generation in China's modern history. Unlike their Communist Party predecessors, whose education had been generally haphazard, China's current top leaders were educated at China's most elite institutions, such as Peking University and Tsinghua.

Although they talk about political and legal reforms, these leaders have been educated as engineers and are more interested in building dams and roads than in introducing political reforms. In fact, the major political reform of the post-Mao era--the elections of village heads and village councils--had occurred in the late 1980s, when Deng was the paramount leader.

China's current leaders have introduced policies to narrow the economic inequalities between rural and urban areas and coastal and inner provinces. They have faced up to the increasing degradation the enviroment and water supply, problems caused by China's fast-paced economic development. At the same time, they have narrowed the space for the political discourse that opened up in the late 1990s.

While addressing the issues of economic and social disparities and talking about "democratic" reforms, in reality, they have stepped up political repression by arresting defense lawyers, freelance intellectuals, newspaper editors, journalists and cyber-dissidents who have challenged the party's authority and attempted to assert their political rights.

Soon after Hu Jintao came to power, a number of outspoken journalists were arrested in an effort to rein in the media. The group Reporters Without Borders report that 50 journalists are in prison today in China, more than in any other country. Prior to the convening of the 17th Party Congress, there was a renewed crack-down on dissent.

Outside observers had expected that China's dynamic entrepreneurial class and growing middle class, spawned by economic reforms, would become the basis for a bourgeoisie, comparable to the middle class that arose in the West with the industrial revolution and became the class base for Western democracy.

Unlike what happened in the West, however, China's rising middle class is not an independent entity. Its entrepreneurs are dependent on the party for their economic livelihood. They need the help of party officials to initiate and maintain their enterprises. Local party officials determine whether they can get access to resources, land and markets. Without the support of party leaders, they cannot survive economically.

At the same time, the party is co-opting China's entrepreneurs into the party. A third of the party's new members now come from China's rising middle class. Despite China's move to a market economy and integration into the world economy, its fourth generation of leaders has reinforced China's authoritarian, one-party state and introduced procedures to make it more durable.

So a central question today is whether the new generation of leaders tapped at the 17th Party Congress will follow in the footsteps of the current leaders or, alternatively, introduce political reforms and broaden the space for political discourse.

The two "new generation" names most cited as possible successors to the current leaders are Li Keqiang, a prodigy of Hu Jintao, who also rose through the China Youth Leagues and was party head of Liaoning province in China's Northeast, and Xi Jingping, currently the party boss of Shanghai.

Both resemble their predecessors in that they have been educated at China's elite universities, but they differ in important ways. They are in their early 50s, about 10 years younger than the current leaders. This means they came of age during the Cultural Revolution (1966-1976), when Mao, in an effort to dislodge members of the party whom he believed were conspiring against him, mobilized the Red Guards--members of the younger generation, particularly the educated youth, who were sent out to rebel against authority.

Following orders from Mao, these Red Guards not only rebelled against the party, but against all authority, including their teachers and families. When they created chaos, Mao then sent them to the countryside to learn from the peasants. In the countryside, they saw the Communist revolution they had fought for had not transformed peasants' lives--the peasants continued to live in poverty. When they returned to the cities after Mao's death in the late 1970, some of them began to question party authority and call for political reforms, which resulted in the Democracy Wall movement of 1978-1979.

Even if Li and Xi may not have participated in political movements during and after the Cultural Revolution, they were members of this questioning generation. Moreover, they entered political life during the 1980s, when party leaders appointed by Deng Xiaoping, such as Hu Yaobang, in office 1980-1987, and Zhao Ziyang, in office 1987-1989, talked about the need for political reforms. In addition, unlike their predecessors, they were not trained as engineers, but were educated in the law, which may make them more interested in establishing the rule of law than building China's economic infrastructure.

After all, it was Mikhail Gorbachev, Russia's first party head trained as a lawyer rather than an engineer, who opened up Soviet society, stopped the repression of Soviet dissidents, and sparked the beginning of the end of the Communist system in the Soviet Union.

Still, the late 1980s Gorbachev scenario, which allowed more freedom of speech and association that led to the implosion of the Soviet Communist Party in the 1990s, deters party leaders from following a similar path. In fact, the goal of China's current leaders' continuing crackdown on dissent and independent political discourse and association is to ensure the Chinese Comunnist Party does not follow the path of the former Soviet Union.

Certainly, as we have seen, a younger, better-educated leadership in China, presiding over a dynamic market and international economy, does not guarantee China will move in a democratic direction in the near future. However, if the repressive methods of China's current authoritarian populist leaders prove unsuccessful in dealing with the urgent problem of increasing inequality, environmental degradation and growing protests, China's new generation of leaders may be more willing to turn to democratic and legal procedures to channel rising discontent into less disruptive actions and more constructive results.


 

November 09, 2007

The battle for oil: China vs US oil companies

November 06, 2007

Suspicious firings ahead of new China Labor Law

Rumors spread as Chinese and Foreign companies including CCTV,  Huawei Technologies Co Ltd, LG Electronics, and Wal-Mart China carry out drastic domestic work cuts just before the enactment of the Employment Contract Law on January 1, 2008.

As Zhongguo Wang reported, on October 22, the Wal-Mart Procurement Center ordered its Chinese branches to cut about 100 employees in Shenzhen, Shanghai, Putian, and Dongguan stores. Shenzhen-based Huawei asked over 7,000 employees working for more than eight years to voluntarily resign before next year, offering one-to-three-year contracts with some after the resignations, China Business News reported on November 5.

According to the Employment Contract Law, employees who work for 10 years in a company may sign flexible-term contracts with their employers, and industry insiders believe the new law is the driving force behind this sudden round of firings. However, almost all major companies firing employees at the end of this year denied that the adjustments were related to the Employment Contract Law.

Officials from the Wal-Mart Procurement Center explained the move was just part of the center's global human resource strategy, while LG Electronics said it was a tactic for the company to secure higher status in the industry. Most employees that LG let go had worked in the company for about five years and were fired after their contracts expired. Meanwhile, Huawei said the human resource restructure aims to enhance the company's competitiveness, according to China Business News.

Although these companies are itching to make clear their motivations, experts and industry insiders see things in a different light. "Labor costs will be increased and it will be difficult for companies to fire employees after the legislation is ratified next year," said an anonymous human resource manager from a multinational company.

The new law, which regulates probation periods, contract terms, and company liabilities, aims to erect stronger legal protection for employees. Companies have been compelled to rebuild talent pools as the new law challenges human resource management, according to Zhang Mingjing, a lawyer from the Shanghai Huarong Law Firm.

It is understandable for companies like Huawei to enhance competitiveness by asking veteran employees to resign and signing short-term contracts with some of them, said Yang Xihong, general manager of Guangzhou Ruiqi Human Resource Co Ltd. "However, it conveys a negative image and magnifies misunderstandings of the new law," he added. Spreadtrum Communications Inc, China's Nasdaq-listed 3G solution provider, slashed its workforce in the same month as Huawei, one of the biggest telecommunication network providers in the country.

Although China Business News revealed Huawei offered compensation packages totaling about 1 billion yuan (US$134.16 million) for those asked to resign before next year, experts believe the move is meant is to avert liabilities required by the new law.

"The Employment Contract Law was set up to enhance companies' innovative abilities in the long run," said Ye Jiaguo, deputy researcher from the Companies' Social Duties and Public Service Research Center at the Guangdong Social Sciences Institute. "The economy will be trapped in a vicious circle if it relies too much on a cheap labor force. The increase of labor costs will force companies to pay more attention to innovation and employees training."

Who wants to be a billionaire?

I don't know if this show still exists or if it has ever been shown on Chinese TV but apparently, the number of billionaires in China is climbing the ladder very very fast.

As counted by Forbes, the US currently has 415 billionaires making it the top country in the list. And how about China?

Last year, Forbes cited they were 15 billionaires. And now? Forbes and Hurun disagree. The US magazine claims there is 66 while Hurun thinks there is around 100. Whatever is the number it makes a big number compared to the one of the last year.

But who knowns the Yang, Guo and Zhang? Nobody in China so even less in the Western world. The fact is most of those billionaires have started from scratch and can be praised for their success because of their hardwork and their acknowledgment that globalization is an opportunity, not a threat. (Wish my fellow countrymates think the same!).

The latest in the list of new Chinese billionaires is one of my favorites: Jack Ma, one of the founders of Alibaba.com.
Yesterday, Alibaba.com listed for the first time at the Hong Kong Stock Exchange and in a matter of minutes. The Alibaba.com shares climbed by 193%. Who can beat this in Western markets, not even google, I think? So now, Jack Ma is even richer than Jerry Yang, the founder of Yahoo! who owns 40% of the company Alibaba.com. Not sure, Jerry Yang celebrated yesterday the listing when he was focused on this.
For more information, please read:
International Herald Tribune:  China's economy  generates billionaires by the dozen.
New York Times: Alibaba shares nearly triple in debut



November 05, 2007

China tops the charts in IPO listing

Surging Chinese stock markets won the global IPO crown  hosting more share flotations and raising more capital than bourses in any other country.

Other emerging markets, from Brazil to India, also boasted record IPO activity, but flotations slumped in mature markets under the weight of a credit crunch touched off by the meltdown in the U.S. subprime mortgage market.

No doubt that emerging markets are to be seen through. The latest in IPOs was the one of Petrochina at the Shanghai Stock Exchange and for the first time in history, a company listed at a market value of 1 trillion USD topping Exxon Mobil.

November 04, 2007

Documentary about the People's Court of China and its legal system

November 02, 2007

China vs India - Race to the Top of the World

October 31, 2007

Fortune magazine: China's Top 25 Brands

Just came across a post from the China Game Blog about the Top 25 Brand in China according to a poll made by Fortune magazine in mid-2006. No details were given about the methodology to choose the Top 25. My question is where are the Baidu, the TCL, the Lining, the Alibaba, the Samsung, etc...?

1- BMW: No surprise the German automaker is at the top of the list: German quality, position itself as a high brand, very good after sales-service.

2- Microsoft: Not the best product in the market. Firefox is nowhere in sight, at least in China. Strange at the same when you know that 95% of the window softwares are copies. Probably, the American dream of Bill Gates, the richest man in the world makes its magic.

3- Intel: Surprise to find them here. Not a very sexy product but at the top of the market for the past 20 years or so. The American dream?

4- Mercedes Benz: German automaker known for its quality but fail to provide good after sales-service. Remember the Wuhan story?

5- Coca Cola: One of the first Foreign brands to get into China. You can find it everywhere.

6- IBM: Reliability. Probably the sell of its PC division made him even more famous.

7- Haier: Probably, the most successful Chinese brand in China and abroad. Well deserved position!

8- Nokia: 35% market share in China. Their mobiles still look very trendy for Chinese consumers.

9- Wuliangye: No business deal without it. Foreigners be aware!

10- Kwechou Moutai: If it is not Wuliangye, it is moutai. Strong stomach is needed. Avoid them! I prefere Ergoutou.

11- Airbus: A380 makes the company famous. Chinese prefers to fly Airbus than Boeing more space for their legs. Ask your staff!

12- Porsche: Late comer in the Chinese market but makes a very good impression with the social elite. You can find the Porsche Cayenne everywhere!

13- Audi: A4 or A6, ask your government official which one he/she has?

14- Lenovo: The purchase of the IBM PC division raise its profile.

15- Motorola: Still famous but poor quality.

16- Wal-mart: Carrefour is much bigger in China but nowhere in sight. Strange!

17- Boeing: Behind Airbus but coming back strongly. I am sure the  boeing 787 will be  very successful here.

18- Google: Baidu search engine is favoured but google is liked among Chinese because of its success around the world.

19-Tongrentang: I would have put this pharmaceutical company at a higher position. Here is a company used by all generations in China.

20- Tsingtao: My favorite drink in China. Personally, they shall expand more aggressively abroad because the Foreigners like it when they come here.

21- Pepsi: For the young generation. They lost against their arch-rival Coca Cola.

22- Siemens: has spread everywhere and has more than 50 JVs around China.

23- Sony: Good products like the Bravia and the fame of the Playstation but their mobile is loosy, at best.

24- Nike: Copied but the Chinese like it.

25- General Motors: was in much higher position but failed quality of their new products....Will probably fall from the Top 25 in the coming years.

October 28, 2007

Chinese Direct Investment Abroad Has Grown Twenty-Fold Since 2000

Via China Challenges, PPI gives a glimpse of what has been an increase by twenty fold  of  Foreign Direct Investment by China. I would assume  the FDI will continue  to increase  in the next two decades as  China as large economic  reserves  that it doesn't know  how to spend.

To have a full view of the article, please go to  PPIonline.

Update: To mirror the article published above, I suggest you read the excellent article the Wall Street Journal called "China Bear Hug"

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